ADVO Eyes Continued Growth With 3 New Programs

Though ADVO Inc. was already sending billions of direct mail pieces annually, the firm added three shared-mail programs reaching more than 9 million households last month and expects its revenue to grow 9 to 11 percent in fiscal 2005.

ADVO's 2004 revenue grew 10.1 percent for its third fiscal quarter ended June 26, or $29.2 million over the prior-year quarter to a record $318.9 million. The revenue increase was driven by advertising piece volume growth of 12.1 percent to 7.5 billion pieces, the company said.

ADVO releases its fourth-quarter earnings for fiscal 2004 on Oct. 21. Though the firm adjusted its Q4 earnings-per-share expectations to $1.70 due to the expense of expansion, it projects profit for fiscal 2005 of $1.80 to $1.85 per share.

"Our momentum has really increased throughout this last fiscal year, and it's a direct result of our growth strategy being put into action," said Chris Hutter, vice president for investor relations at ADVO, Windsor, CT. "That strategy has resulted in these new programs."

The three new programs dropped for the first time in mid-September. Each has a supermarket chain as its anchor advertiser.

The Southern California program features Albertsons supermarkets as its main advertiser and reaches about 7.2 million households in the greater Los Angeles and San Diego metropolitan areas. The weekend program joins ADVO's successful midweek program in this market.

To accommodate the growth in this region, ADVO opened its second Los Angeles facility with more than 100 employees to fulfill the program needs.

The greater Pittsburgh and Youngstown, OH, midweek program is anchored by Giant Eagle supermarkets and reaches about 1.3 million homes in parts of Pennsylvania, Ohio, Maryland and West Virginia. ADVO also has a weekend program in this market.

In the Raleigh-Durham, NC, area, ADVO added a biweekly program with Food Lion as its main advertiser, reaching 600,000. This doubled ADVO's frequency in the region from biweekly to weekly when combined with its existing biweekly effort.

The new programs have attracted new advertisers to ADVO shared mail.

"Different categories of retailers have preferences for delivering their advertising to the home on different days of the week, so what these programs do is open up and make available our targeted in-home delivery capabilities to other categories of advertisers that we weren't able to service before," Hutter said.

The shared-mail medium also offers marketers a very targeted, measurable option, he said.

"Advertisers are increasingly looking to increase the return on investment of their advertising dollars, and there are so many technology-related factors that are beginning to erode the effectiveness of traditional electronic media," he said. "That, combined with our targeting capabilities, really means that our kind of advertising is increasingly in higher demand because it generates an increasingly higher ROI that is very measurable."